Liberalised Capital Accounts and Volatility of Capital Flows and Foreign Exchange Rates

Bogdan Bogdanov ()

No 521, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: Whether free movement of international capital induces greater risk of foreign exchange rate and balance-of-payments volatility, or not, is an important question in international finance and economic policy making. The paper employs propensity score matching methodologies to estimate the impact of maintaining open capital accounts on the volatility of international capital flows and foreign exchange rates using data for 69 countries, in the sample period 1980-2011. The findings of the study suggest that maintaining an open capital account could contribute to lower foreign exchange rate volatility. It also finds that capital flow management measures may not have an effect on the volatility of short- and long-term capital flows.

JEL-codes: C21 F30 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2014-07
New Economics Papers: this item is included in nep-ifn and nep-opm
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecopap:0521

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